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Thursday, April 19, 2012

Dedicated platform for SME trading and first listing at BSE

Its share hover around the price of Rs.25 and its volume is 4000 on 19th April 12.   The market cap is 28.81 and it high was 27, is there anything significant about this stock at all ?

Some may be surprised to know that there is a dedicated Stock Exchange for SME – an SME Exchange – exclusive trading window for the shares of small and medium scale enterprises (SMEs) who, otherwise, find it difficult to get listed in the main exchanges. The concept originated from the difficulties faced by SMEs in gaining visibility or attracting sufficient trading volumes when listed along with other stocks in the main exchanges.

World over, conceptually such trading platforms do exist but knowb by various names  such as Alternate Investment markets or growth enterprises market, SME Board etc. In India, “SME exchange” is defined in Chapter XA of the Securities And Exchange Board Of India (Issue Of Capital And Disclosure Requirements) Regulations] as a trading platform of a recognised stock exchange or a dedicated exchange permitted by SEBI to list the securities issued in accordance with Chapter XA of SEBI (ICDR) Regulations.  To be listed on the SME exchange, the post-issue paid up capital of the company should not exceed Rs. 25 Crores.

This means that the SME exchange is not limited to the Small and Medium Scale enterprises which are defined under  The Micro, Small And Medium Enterprises Development Act, 2006 as enterprises where the investment in plant and machinery does not exceed Rs. 10 crores.  Why such a platform for SME one tends to ask and the answer is that they  constitute the bulk of the industrial base and also contribute significantly to their exports as well as to their Gross Domestic Product.   The Micro Small and Medium Enterprise (MSME) sector forms the largest generator of employment in the Indian economy. It forms a major portion of the industrial activity. Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 is provided for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises.  The Prime Minister's Task Force (Jan. 2010) recommended setting up  a dedicated Stock Exchange/ Platform for SME.

When the Over the Counter Exchange of India, or OTCEI, started in 1991, young entrepreneurs were thrilled. At last, small and medium enterprises, or SMEs, had a way to raise capital other than pleading with banks and rich relatives. It failed to live up to the expecations.

At SME Exchange, it is stated that listing fee would be lower and compliance norms will be softer: SMEs will need to publish results electronically, and only every six months, rather than the quarterly requirement for companies listed on the main board. SMEs who want to list need not show profitability.

Still after all that, the “Small is beautiful” Stock Exchange launched by the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) has received only muted response.   Just one firm, BCB Finance, has got listed on BSE’s SME Exchange. Trading activity is almost negligible in the counter. Two more companies, Max Alert Systems and Monarch Health Services, have filed their prospectus with the bourse. They are likely to go public sooner.

The activity on the SME platform cannot be seen in isolation and has to be seen in the context of the overall sentiment in the primary markets. One fondly hopes that SME exchange picks up and all concerned with SME grow bigger…..

The one mentioned at the start of this post is BCB Finance, originally incorporated with the Registrar of Companies, in 2005 as BCB Finance Private Limited.  It is a NDFC registered with RBI  engaged primarily in the business of advancing loans and investing/trading in securities.  BCB Finance, the first company to list on small and medium enterprises (SME) platform of the Bombay Stock Exchange (BSE) made a lukewarm debut after listing at Rs 27 a share, 8 per cent premium to its issue price, but closing the day at Rs 25.7 a share or just 2.8 per cent above the IPO price.   The performance of the company will be keenly followed as a test case for other SMEs to eye a listing on a public bourse. Even as the absence of institutional investors may be seen as a dampener, the debut listing on the new trading platform of BSE could prompt other smaller firms to go public instead of looking for venture capital or small ticket private equity deals.

With regards – S. Sampathkumar.

1 comment:

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